June 1996
Under Part 148, voluntary compliance audits provide business with the flexibility necessary to implement an effective compliance program, and to correct compliance or permit violations that were historically avoided for fear of penalties or enforcement action. Starting with a baseline audit, concerns can be prioritized, and focused audits can then be conducted to identify and correct violations.
The new audit protection is not without controversy. Although 17 states have enacted audit privilege or immunity laws (including Arkansas, Colorado, Idaho, Indiana, Illinois, Kansas, Kentucky, Minnesota, Mississippi, Oregon, Texas, Utah, Virginia, and Wyoming), 25 states have pending bills, and two federal bills are being considered (HB 1047 and SB 582), some EPA regional offices have expressed dissatisfaction with aspects of audit privilege laws. They have suggested revoking a State's delegated ability to administer regulated programs, such as the Clean Air Act operating permit programs, where the audit protection and immunity laws are too broad to permit implementation of the programs. In general, they are opposed to any privilege that can shield from the government and the public all factual information about an aspect of environmental noncompliance.
In a letter to the Michigan Environmental Council, the EPA has identified specific concerns with the Michigan legislation. It believes that it will encourage litigation over the scope of the privilege provided, and the procedures for disclosure review will complicate investigations and criminal prosecutions because of the need to establish a preponderance of evidence that the exceptions provided in the law apply. According to their review, the definitions of "audit" and "audit privilege" are too broad, the schedule for correcting violations are too vague and therefore at the discretion of industry, and there are insufficient incentives for disclosure.
In addition, some groups have called the new legislation a "secrecy law" that will permit industry to avoid obligations for corrective action, and limit public access to information necessary to protect human health and the environment. Others have indicated that the privilege and immunity provided by the bill, while necessary to encourage voluntary audits, are excessive, and that industry is sufficiently protected by the EPA audit policy (60 FR 60706, effective January 22, 1996)
However, specific provisions of the legislation address many of these concerns. Under this legislation, the Michigan Department of Environmental Quality (MDEQ) will continue to receive the information necessary to enforce state laws, since all information required under local, state and federal laws is exempt from the privilege. Secondly, the immunity extends only to violations that are promptly disclosed and corrected. In addition, existing liabilities for environmental damages, enforcement actions, and environmental restoration remain in effect.
The Act facilitates the relationship between the consultant and facility owner or operator by extending protection of the audit report information to disclosure of that information to consultants retained to address issues raised by the audit. Therefore, it is important that the owner identify programs being conducted under the audit privilege, and any information that is protected under Part 148 of the Act. Conversely, consultants must understand the limitations that apply to use and distribution of privileged information.
When providing services for a client, the consultant must consider all information confidential, but Part 148 adds additional requirements to the documentation procedure and report formatting. For audit reports, inclusion of all raw data and supporting documents, as well as any other information used or generated during the audit, is essential for meeting the requirements of the legislation. For other reports, such as Phase I Site Assessments, what information to include as supporting documentation should be carefully considered, since it may make the information available from an independent source and therefore negate the privileged status of that information.
The Act does not require that the audit result in a written document or a report. However, if information is to be considered privileged it must be contained in a report. In addition, only violations discovered during the audit qualify for immunity, and the audit report will provide documentation of the audit process and the subsequent discoveries. Therefore, when preparing to conduct a voluntary environmental audit under Part 148, the owner or operator should inform the consultant that the audit will be covered by the Act, and determine the format and contents of the final report. This is especially important when defining the specific objectives of an audit, and because of the special needs for evaluating and incorporating supporting documentation.
When preparing the Work Plan for a Part 148 audit, the consultant should document that the audit process is being conducted voluntarily, and that the objective of the audit meets one of the objectives stated above. The audit should then focus specifically on the stated objective.
When creating the final audit report, the consultant must properly label the report as "Environmental Audit Report: Privileged Document", and must provide all applicable supporting documentation. In addition to the typical appendix items, this can include field notes, drafts, electronically recorded information, and photographs so as to provide a complete record of the audit and provide protection to all information generated during the audit. Whenever possible, information contained in the report that is not subject to the privileged status should be identified to the owner in a separate cover letter. Distribution of the report should be strictly limited to the person requesting the audit.
The audit report may contain an implementation plan to correct the violation. If included, the implementation plan is covered under the privilege status of the report. Considering this protection, and the presumption that violations will be promptly corrected, the implementation plan should be a standard part of the audit process and resulting report.
The Michigan Department of Environmental Quality has formed an internal Audit Task Force to draft procedures for implementing the provisions of the legislation. The Task Force includes the chiefs of the Compliance and Enforcement Divisions, various field supervisors and MDEQ staff. You can expect various operational memoranda and guidance documents over the next year or two as industry corrects historic violations.
However, business should move quickly to take advantage of the protections provided by this legislation. Instituting voluntary programs will provide you with more flexibility for designing and implementing both the audit and the corrective actions. Maintaining the traditional wait-and-see strategy may not only result in loosing the privileges provided in the Act, but may permit wasteful and costly mistakes to continue. Finally, don't overlook the opportunity to use the audit process to evaluate the effectiveness of selected remedies, conduct contamination investigations, and audit management systems.
For more information on environmental programs for your business, contact Mr. Thomas Wackerman, Managing Partner at Applied Science & Technology, Inc. at 800.395.ASTI or visit our homepage
1998 is approaching, and the underground storage tanks require attention. We will provide an overview in our next issue.
On July 25th, Applied Science & Technology, Inc., in conjunction with Dickinson, Wright, Moon, VanDusen & Freeman, will present a breakfast seminar in Troy, Michigan on implementing the audit privilege protections. For reservations or more information call Lenna Dietrich at 1-800.395.ASTI.
Applied Science & Technology, Inc. staff is presenting a one semester course on Environmental Information Management using the Internet. at Wayne State University in Detroit, Michigan. The course starts January, 1997 and is taught entirely on the Internet. For more information call Tom Wackerman at 800.395.ASTI or send email request to twacker@chem1.eng.wayne.edu
The Compliance Calendar is not available for this month. It will return next month.
TECH-BITS is a monthly publication of Applied Science & Technology, Inc. (ASTI), P.O. Box 1328, Ann Arbor, Michigan, 48106. For a free mail subscription call 800.395.ASTI. For a free electronic subscription, send an email message to twacker@chem1.eng.wayne.edu, referencing Tech-Bits in the body of the message.
TECH-BITS is intended to provide information concerning current environmental issues, and is not intended to provide technical or legal advice regarding any particular situation. Questions about individual situations should be addressed to your environmental engineer. Copyright 1995 by ASTI